Home prices in Dubai bottom out after major slump

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The residential real estate industry in Dubai seems to have bottomed out a little after the price slump of three years. Several developers and brokers have reported encouraging levels of interest from prospective homebuyers and investors as per reports. This is a welcome development for the real estate sector and the growing interest may indicate stability of the sector in the long term according to market experts.

According to industry sources, home prices have been going down in Dubai from mid-2014 onwards and prices are now at levels which have not been witnessed right from late 2012 or early 2013. In the 18 months leading up to April, 2017, median property prices in Dubai slumped by a whopping 20% as per reports. Median rental prices also came down by 21% in the same period as per reports. Dubai is now more mature, regulated and complete as a property market according to several industry experts and the current trends are reflective of these developments.

The slowdown in Dubai is quite contrasting as compared to the relatively overheated Hong Kong and New York real estate markets. Another 28, 000 units are expected to be released by the end of 2017 in Dubai and prices could remain low until 2018 at least as expected by experts. However, there has been a comparatively slower decline in property sales and rental values which is a better trend for developers.

There is a higher financial incentive to buy property as compared to renting.  According to industry players, the popular Springs community serves as a major example of this trend. One cannot expect up to 6.5% in rental yields (net) or net returns on equity of circa 10% for finance buyers using the 75% LTV (loan-to-value) mortgage products. This offers a better incentive to buy as opposed to renting. This is a better time to buy property in Dubai and the optimism has not gone unnoticed in case of buyers and prospective investors. The inflationary risks tied to buying property however, should not be skipped over for any investor with a long-term goal in mind according to experts.

 

Resident Editor